Parts, Service Business Rebounding From COVID-Induced Slump

Most categories of dealership service and parts businesses continue to bounce back from earlier COVID-19 shutdowns, especially customer-pay work, as customers drive more.

“Obviously, miles driven is up,” says Chris Holzshu, executive vice president and chief operating officer for Lithia Motors. That creates opportunities for parts and service sales in a lot of ways, he says in a first-quarter earnings conference call.

More driving means customers wear out their cars faster and have more collisions, and therefore need more body work. Many customers also are coming in for service work they postponed earlier in the pandemic, Holzshu (pictured, below left) says.

Chris Holzshu Lithia Motors(1)

According to the Federal Highway Admin., vehicle miles traveled on all U.S. roads was 235.7 billion (379.5 billion km) in February, the latest month available. That’s an increase of 10.6% vs. a year ago. For all of 2021, vehicle miles traveled increased 11.2%, to about 3.2 trillion (5.2 trillion km) miles.

For Medford, OR-based Lithia Motors, customer-pay service work increased 15% year-over-year in the first quarter. Body-shop work increased 5%, the company says. Warranty work continued to lag, down about 3%.

The mix of warranty work is down because new-vehicle volume is down, Lithia says. In total, Lithia service, body and parts revenue on a same-store basis was $437.4 million in the first quarter, up 13.3% vs. a year ago.

At AutoNation, same-store revenue for parts and service was $966.6 million in the first quarter, up 15.5% vs. a year ago. Manley says that besides the increase in vehicle miles traveled, AutoNation reports an increase in internal service work, in part because it’s reconditioning more used vehicles. Manley also notes warranty work in parts and service is down.